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{{Short description|Economic idea developed by Silvio Gesell}}
{{Multiple issues
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'''{{lang|de|Freiwirtschaft}}''' ([[German language|German]] for "free economy") is an economic [[idea]] founded by [[Silvio Gesell]] in 1916. He called it ''{{lang|de|Natürliche Wirtschaftsordnung}}'' (natural economic order). In 1932, a group of Swiss businessmen used his ideas to found the [[WIR Bank]] (WIR).
|primary sources = January 2009
|notability = May 2010
}}

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'''''{{lang|de|Freiwirtschaft}}''''' ([[German language|German]] for ''free economy'') is an economic [[idea]] founded by [[Silvio Gesell]] in 1916. He called it ''{{lang|de|Natürliche Wirtschaftsordnung}}'' (natural economic order). In 1932, a group of Swiss businessmen used his ideas to found [[WIR Bank]] (WIR).


==Structure==
==Structure==
Freiwirtschaft consists of three central aspects, usually summed up as ''The Three Fs'':
Freiwirtschaft consists of three central aspects, usually summed up as the Three Fs:
* ''{{lang|de|[[Freigeld]]}}'' (''free money'')
* ''{{lang|de|[[Freigeld]]}}'' (free money)
**All money is issued for a ''limited'' period by ''constant'' value (neither [[inflation]], nor [[deflation]]).
** All money is issued for a ''limited'' period by ''constant'' value (neither [[inflation]], nor [[deflation]]).
**Long-term saving requires investment in [[Bond (finance)|bonds]] or [[stock]]s.
** Long-term saving requires investment in [[Bond (finance)|bonds]] or [[stock]]s.
* ''{{lang|de|[[Freiland]]}}'' (''free land'')
* ''{{lang|de|[[Freiland]]}}'' (free land)
**All land is owned by public institutions and can only be rented, not purchased (''see also [[Henry George]]'').
** All [[land (economics)|land]] is [[common ownership|commonly owned]] or else the property of public institutions and can only be rented from the community or from government, respectively, not purchased (''see also [[Georgism]]'').
* ''{{lang|de|[[Freihandel]]}}'' (''[[Free Trade]]'')
* ''{{lang|de|[[Freihandel]]}}'' (free trade)
**Unrestrained [[free trade]] supported by an international currency union as paper standard to maintain stable exchange rates and abolition of the [[gold standard]] in foreign trade.<ref>{{Cite web |title=4.6-3. International Trade: Stabilisation of the International Exchanges. The International Valuta Association. |url=https://www.community-exchange.org/docs/Gesell/en/neo/part4/6-3.htm |access-date=2023-05-18 |website=www.community-exchange.org}}</ref>
** Free Trade has long been a mainstream position now, but the [[anti-globalization movement]] largely opposes it.


== History ==
== History ==
The basic economic ideas of ''Freiwirtschaft'' were published in 1890 by the Hungarian-Austrian economist [[Theodor Hertzka]] in his novel ''Freiland - ein soziales Zukunftsbild<ref>Theodor Hertzka: ''Freiland - ein soziales Zukunftsbild'', Leipzig 1890 [http://lilienthal-museum.de/olma/hertzka.htm Summary] on the website of the [[Otto-Lilienthal-Museum]]</ref> (''Freeland - A Social Anticipation'').<ref>Theodor Hertzka: ''Freeland - A Social Anticipation'', St. Loyes, Bedford, June, 1891. [http://www.gutenberg.org/ebooks/9866 Book online] at [[Project Gutenberg]]</ref>
The basic economic ideas of Freiwirtschaft were published in 1890 by the Hungarian-Austrian economist [[Theodor Hertzka]] in his novel ''Freiland - ein soziales Zukunftsbild''<ref>Theodor Hertzka: ''Freiland - ein soziales Zukunftsbild'', Leipzig 1890 – [http://lilienthal-museum.de/olma/hertzka.htm Summary] on the website of the [[Otto-Lilienthal-Museum]].</ref> (''Freeland - A Social Anticipation'').<ref>Theodor Hertzka: ''Freeland - A Social Anticipation'', St. Loyes, Bedford, June, 1891. [http://www.gutenberg.org/ebooks/9866 Book online] at [[Project Gutenberg]].</ref>


== Flaws of the monetary system ==
== Flaws of the monetary system ==
{{lang|de|Freiwirtschaft}} claims that current monetary systems are flawed. According to [[Adam Smith]], prices convey information. For example, dropping prices on a product mean that there is less demand or more supply of that product. This leads to a buyer buying more, or a seller/producer starting to sell/produce something else, thereby reducing the supply of that product. As a reaction, assuming constant desirability, the price of the product rises again. So, the price, together with the market participants, builds up a [[feedback]] loop around a stable, "ideal" price. At this stable price, the market is ideal, no one pays too much or earns too little, and there are no tendencies from either party to change that price. The "wobbling" around that ideal price is called ''self-stabilizing''.
Freiwirtschaft claims that current monetary systems are flawed. In mainstream economics, prices convey information. For example, dropping prices on a product mean that there is less demand or more supply of that product. This leads to a buyer's buying more, or a seller's/producer's starting to sell/produce something else, thereby reducing the supply of that product. As a reaction, assuming constant desirability, the price of the product rises again. So, the price, together with the market participants, builds up a [[feedback]] loop around a stable, "ideal" price. At this stable price, the market is ideal, no one pays too much or earns too little, and there are no tendencies from either party to change that price. The "wobbling" around that ideal price is called ''self-stabilizing''.


This is not the case in the financial markets. Without the continuous increase of the amount of money in circulation by the [[central bank]], the demand would continuously drop, since the [[velocity of money]] circulation decreases.<ref>Norbert Rost: [http://userpage.fu-berlin.de/~roehrigw/diplomarbeiten/rost/ueaf.pdf Eine experimentelle Überprüfung der Aussagen der Freiwirtschaftslehre] (An experimental check of the statements of the Freiwirtschaft) (diploma thesis, Dresden, 2003) p. 25 seqq.</ref> Dropping demand forces companies to lower their prices to make any money at all. When prices start dropping, potential customers put off their purchase as long as possible to get the lowest price, resulting in the demand decreasing even more. The feedback loop spirals down to a point where the company does not make any money at all. That, eventually, results in layoffs and even the bankruptcy of the company. Workers in other companies tend to be even more cautious in spending money, ultimately resulting in the breakdown of the economy.
The key error of the current system, according to Gesell, is the ill-transported information in the price. Money is nothing but a claim for goods and services, usable in the economies that accept money in exchange for the former. In a weak economy, money is worth less in goods. But instead of an [[inflation (economics)|inflation]], the result is a [[deflation (economics)|deflation]] as described above, and less money can now buy the same goods. This feedback loop is ''self-destabilizing'', according to the Freiwirtschaft theory.<ref>Norbert Rost: [http://userpage.fu-berlin.de/~roehrigw/diplomarbeiten/rost/ueaf.pdf Eine experimentelle Überprüfung der Aussagen der Freiwirtschaftslehre] (An experimental check of the statements of the Freiwirtschaft) (diploma thesis, Dresden, 2003), p. 25ff.</ref>

The key error of the current system, according to Gesell, is the ill-transported information in the price. Money is nothing but claim for goods and services, usable in the economies that accept money in exchange for the former. In a weak economy, money is worth less in goods. But instead of an [[inflation (economics)|inflation]], the result is a [[deflation (economics)|deflation]] as described above, and less money can now buy the same goods. The market players do not realize that they are destroying the very economy that should ensure the value of the money. This feedback loop is ''self-destabilizing''. According to the "Freiwirtschaft" theory, this is the reason for the cycle of crisis in world economy.


==References==
==References==
<references />
<references />

==Sources==
* Helmut Creutz, ''The Money Syndrome – Towards a Market Economy Free from Crises'', Upfront Publishing 2010.
* Günter Bartsch, ''Die NWO-Bewegung Silvio Gesells – Geschichtlicher Grundriß 1891-1992/93''. Gauke, Lütjenburg 1994.
* Knulp Goeke, ''Die verteilungspolitische Problematik der Freiwirtschaftslehre''. Cologne 1961.
* Johannes Heinrichs, ''Sprung aus dem Teufelskreis. Sozialethische Wirtschaftstheorie'' Vol. I, Munich 2005.
* Hans-Joachim Werner, ''Geschichte der Freiwirtschaftsbewegung. 100 Jahre Kampf für eine Marktwirtschaft ohne Kapitalismus''. Waxmann, Münster 1990.


==External links==
==External links==
* [http://www.finanzcrash.com/english/aberrations.html Introduction to Freiwirtschaft]
* [http://www.finanzcrash.com/english/aberrations.html Introduction to Freiwirtschaft] {{Webarchive|url=https://web.archive.org/web/20100521061503/http://www.finanzcrash.com/english/aberrations.html |date=2010-05-21 }}
* [http://geldreform.de Materialien zur Geld-, Zins- und Schuldenproblematik (in German, partly English)]
* [http://geldreform.de Materialien zur Geld-, Zins- und Schuldenproblematik (in German, partly English)]
* [http://www.inwo.de Fairconomy (in German, partly English)]
* [http://www.inwo.de Fairconomy (in German, partly English)]
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{{Schools of economic thought}}
{{Schools of economic thought}}


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[[Category:Community currencies]]

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[[Category:Economic systems]]
[[Category:Freiwirtschaft| ]]
[[Category:Freiwirtschaft| ]]
[[Category:Heterodox economics]]
[[Category:Local currencies]]
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[[Category:Economic ideologies]]
[[Category:Schools of economic thought]]
[[Category:Monetary reform]]
[[Category:Monetary reform]]
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[[Category:Left-libertarianism]]

Latest revision as of 23:07, 11 May 2024

Freiwirtschaft (German for "free economy") is an economic idea founded by Silvio Gesell in 1916. He called it Natürliche Wirtschaftsordnung (natural economic order). In 1932, a group of Swiss businessmen used his ideas to found the WIR Bank (WIR).

Structure

[edit]

Freiwirtschaft consists of three central aspects, usually summed up as the Three Fs:

  • Freigeld (free money)
    • All money is issued for a limited period by constant value (neither inflation, nor deflation).
    • Long-term saving requires investment in bonds or stocks.
  • Freiland (free land)
    • All land is commonly owned or else the property of public institutions and can only be rented from the community or from government, respectively, not purchased (see also Georgism).
  • Freihandel (free trade)
    • Unrestrained free trade supported by an international currency union as paper standard to maintain stable exchange rates and abolition of the gold standard in foreign trade.[1]

History

[edit]

The basic economic ideas of Freiwirtschaft were published in 1890 by the Hungarian-Austrian economist Theodor Hertzka in his novel Freiland - ein soziales Zukunftsbild[2] (Freeland - A Social Anticipation).[3]

Flaws of the monetary system

[edit]

Freiwirtschaft claims that current monetary systems are flawed. In mainstream economics, prices convey information. For example, dropping prices on a product mean that there is less demand or more supply of that product. This leads to a buyer's buying more, or a seller's/producer's starting to sell/produce something else, thereby reducing the supply of that product. As a reaction, assuming constant desirability, the price of the product rises again. So, the price, together with the market participants, builds up a feedback loop around a stable, "ideal" price. At this stable price, the market is ideal, no one pays too much or earns too little, and there are no tendencies from either party to change that price. The "wobbling" around that ideal price is called self-stabilizing.

The key error of the current system, according to Gesell, is the ill-transported information in the price. Money is nothing but a claim for goods and services, usable in the economies that accept money in exchange for the former. In a weak economy, money is worth less in goods. But instead of an inflation, the result is a deflation as described above, and less money can now buy the same goods. This feedback loop is self-destabilizing, according to the Freiwirtschaft theory.[4]

References

[edit]
  1. ^ "4.6-3. International Trade: Stabilisation of the International Exchanges. The International Valuta Association". www.community-exchange.org. Retrieved 2023-05-18.
  2. ^ Theodor Hertzka: Freiland - ein soziales Zukunftsbild, Leipzig 1890 – Summary on the website of the Otto-Lilienthal-Museum.
  3. ^ Theodor Hertzka: Freeland - A Social Anticipation, St. Loyes, Bedford, June, 1891. Book online at Project Gutenberg.
  4. ^ Norbert Rost: Eine experimentelle Überprüfung der Aussagen der Freiwirtschaftslehre (An experimental check of the statements of the Freiwirtschaft) (diploma thesis, Dresden, 2003), p. 25ff.

Sources

[edit]
  • Helmut Creutz, The Money Syndrome – Towards a Market Economy Free from Crises, Upfront Publishing 2010.
  • Günter Bartsch, Die NWO-Bewegung Silvio Gesells – Geschichtlicher Grundriß 1891-1992/93. Gauke, Lütjenburg 1994.
  • Knulp Goeke, Die verteilungspolitische Problematik der Freiwirtschaftslehre. Cologne 1961.
  • Johannes Heinrichs, Sprung aus dem Teufelskreis. Sozialethische Wirtschaftstheorie Vol. I, Munich 2005.
  • Hans-Joachim Werner, Geschichte der Freiwirtschaftsbewegung. 100 Jahre Kampf für eine Marktwirtschaft ohne Kapitalismus. Waxmann, Münster 1990.
[edit]
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